The reason why both of those are needed is due to the fact that this lua compiler is custom and not a standard compiler.
BULLY uses lua version 5.0.2 and there is NO downloadable binary compiler for that version of lua unless of course you use linux and I will lay a bet that very very few if any here even use linux much less know how to use its vast list of commands.
I am planning at some point a gui addon for the compiler to make things simpler since it seems that a lot of people have problems learning how to use the command prompt which really is a skill everyone should try to learn since command line based applications are far more powerful then any gui based one.